Social housing loan package increased to VND 145 trillion

DNHN - The social housing loan package, originally valued at VND 120 trillion, has been raised to VND 145 trillion with the participation of nine banks, drawing attention from businesses and consumers.

According to the State Bank of Vietnam (SBV), among the nine participating banks, the largest group includes Agribank, Vietcombank, BIDV, and VietinBank, each committing VND 30 trillion. Additionally, five other joint-stock commercial banks, including HDBank, MB, VPBank, Techcombank, and TPBank, are each contributing VND 5 trillion. HDBank is the latest to join the program, reflecting growing interest from financial institutions in the social housing market.

Despite the substantial size of this credit package, disbursement has been quite limited. A report from the Ministry of Construction indicates that only 34 out of 63 provinces have announced lists of 83 projects eligible for preferential loans. Among these, 15 projects have signed credit contracts with a total commitment of VND 4.2 trillion, but actual outstanding loans only amount to VND 1.624 trillion. This shows that 68 projects have yet to sign contracts, including 57 projects without loan demand, six awaiting appraisal, and five failing to meet loan requirements.

The slow disbursement has been attributed to several key reasons. First, the number of participating banks remains limited. Second, the current supply of social housing is relatively low. Lastly, the interest rates and preferential terms have not been sufficiently attractive to borrowers. Although the SBV has twice adjusted to reduce interest rates for the VND 120 trillion fund, rates are still at 8% per annum for developers and 7.5% for homebuyers. The preferential rate period only lasts three years for developers and five years for individual clients, deterring many from accessing this loan package.

To address current challenges, the Ministry of Construction has proposed specific solutions. Firstly, it is essential to continue reviewing and removing obstacles while urging local authorities to promptly announce the list of eligible social housing projects. This will facilitate public access to information and create favorable conditions for project implementation.

Additionally, the Ministry has proposed further consideration of reducing interest rates and extending the duration of preferential loans to encourage social housing development. One of the key recommendations is to allow for the relaxation of credit indicators or limits for commercial banks, where social housing loans would not count towards a bank’s credit targets and would be evaluated annually.

In light of the VND 120 trillion loan package's limited effectiveness, the Government has tasked the Ministry of Construction with studying and proposing a new credit package valued at VND 30 trillion specifically for social housing. The Ministry of Construction states that it is coordinating with the Ministry of Finance and the SBV to compile a report to implement this package appropriately and effectively. The new credit package will focus on enabling low-income individuals to access loans at preferential rates to purchase social housing.

The plan for the VND 30 trillion package is expected to comprise VND 15 trillion from government bond issuances and VND 15 trillion from local budget funds. However, how to allocate these funds remains a matter that needs resolution. Currently, the Government has implemented policies to support individual clients in obtaining social housing loans through the Vietnam Bank for Social Policies, but funds for the 2024-2025 period have not yet been allocated.

In summary, while the VND 120 trillion credit package brings high hopes for the social housing market, slow disbursement and several bottlenecks need to be addressed to enhance the program's effectiveness. The proposed VND 30 trillion package could be a more efficient solution in helping low-income individuals access housing. Close cooperation between functional agencies, commercial banks, and investors will be crucial to the success of these credit programs in the coming period.

Phan Chinh